Mine closures seen to trim exports, GDP

MANILA, Philippines - Investment
banking giant Credit Suisse said the decision of the Department of Environment
and Natural Resources (DENR) to close 23 mine sites and suspend five
others could reduce the country’s export earnings and slow down economic
growth.

“We estimate real GDP (gross
domestic product) growth could decline by around 0.2 percentage points, while
employment could decline by around the same magnitude of 0.3 percentage
points,” said Michael Wan, economist at Credit Suisse.

Wan said the production cuts
resulting from the closures and suspensions would have a more significant
impact on exports and local government’s fiscal balance.

“We estimate that the mining
closures and suspensions could reduce exports by around two percent, weighing
on the current account over the rest of 2017,” Wan added.

He explained mining revenues
also contribute to local government revenues, accounting for around three
percent of local government fiscal surpluses as of 2011 based on latest data
available from the International Monetary Fund.

Last Feb. 2, DENR Secretary Gina
Lopez ordered the closure of 23 of the country’s 41 operational mines and
suspended five others for alleged breach of mining regulations.

This was followed by the
cancellation of 75 Mineral Production Sharing Agreements still in the
pre-operation stage last Feb. 14.

The closure and suspension
orders are seen costing 17 affected cities and municipalities in 10 provinces
over P821 million in foregone revenues annually.

Credit Suisse warned there
could be some longer-term negative impact on foreign direct investments.

“While the first-round
economic impact to the Philippines from the mining ban may be manageable, we
fear that these mine closures could send a negative message to foreign direct
investors and manufacturers about the ease of doing business in the Philippines
over the longer term,” Wan said.

Latest data from the Bangko
Sentral ng Pilipinas (BSP) showed net FDI inflows hit a record level of $7.9
billion last year, 41 percent higher than the $5.64 billion booked in 2015,
despite external shocks from the continued normalization of interest rates in
the US as well as the decision of UK to leave the European Union.